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Chapter 13: Sales Contracts

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1 Chapter 13: Sales Contracts
Brian Messing, Armen Tooloee, Cole Pugliano

2 13-1 Sales What is a sale? A contract where ownership of goods is transferred from the seller to the buyer immediately Ownership is a collection of rights over a certain piece of property These rights include the right to hold title, possess, use, make profit from, waste, and even destroy. Vendor = Seller Vendee = Buyer If the transfer of goods is going to take place in the future it is called a contract to sell. When goods or services are exchanged for other goods or services it is considered bartering.

3 13-1 Sales What are goods? UCC (Uniform Commercial Code) defines goods as tangible, movable items that are perceptible to the touch non-goods are defined as money legal rights patents, copyrights etc. real property (land and buildings)

4 13-1 Sales Payment: Buyer transfers agreed-upon consideration, seller accepts it. Delivery: Act by which the subject matter of the contract is placed in the possession of the buyer. Receipt of Goods: Buyer takes physical possession or control of the goods. Bill of Sale: Written evidence of the transfer of ownership.

5 13-1 Sales Acceptance of Goods: When the buyer has agreed, and the goods received are conforming, or a satisfactory accommodation. Conforming Goods: Goods that specifically fulfill the seller’s obligations Accommodation: An arrangement if the seller is unable to provide conforming goods, instead they provide non-conforming goods. Non-Conforming Goods: Goods that may suffice. Perfect Tender Rule: Enforced by the UCC. Requires the tender of goods to match the buyer’s order absolutely.

6 Contracts that are not Sales
If the primary purpose of a contract is a service it is not a sale Goods may be included but are not the primary purpose An example would be hiring a contractor to fix your roof If you paid for the labor and the materials were included it would not be a sale.

7 What’s Your Verdict At the Dan-Dee Discount Department Store, Jack and Jean Medina signed a contract to buy a clothes washer and dryer set. The Dan-Dee salesperson explained that although the set on display was not in stock, “We will deliver and install it within two weeks.” While shopping at the store, the Medinas left their car in the store’s automobile service department to have the engine’s idling speed adjusted and to have squeaks in the door eliminated. The charge for labor was $45. There was no charge for parts or supplies. The service attendant recommended replacing the car’s tires, and the Medinas agreed. The cost of the tires was $300, plus $25 for balancing and installation. The Medinas also bought a new battery for $59. It was installed free of charge. Which of the transactions were sales?

8 What’s Your Verdict The contract for the washer was a contract to sell because it will happen in 2 weeks The car repairs were not a sale because the contract was for a service not goods. The purchase of tires and a battery were a sale

9 13-2 Special Rules for Sales Contracts
A Merchant is someone who regularly sells products and is held to a higher standard, ie: Car Salesman A Casual Seller is somebody who does not sell something regularly but does on occasion, ie: someone selling their car through the ‘for sale’ ads or craigslist

10 13-2 Special Rules for Sales Contracts
Generally, sales contracts are enforceable whether or not they are written, oral or implied from the conduct of the parties However, the Statute of Frauds states that with goods valued at $500 or more the contract must be written to be enforced in court

11 13-2 Special Rules for Sales Contracts
It is good business practice to have all contracts written However, not all contracts need to be written

12 13-2 Special Rules for Sales Contracts
Receiving goods does not execute a contract Both a receipt and acceptance are necessary If the buyer has received/accepted only some of the goods, the contract is only good for the portion of the goods accepted

13 13-2 Special Rules for Sales Contracts
Example A: Tooloee vs. MATC Armen orally agreed to supply the Messing Aerospace Technology Corporation (MATC) with packing cases made to MATC’s specifications. The cases were to be used overseas. After the specification was received Armen began production. After substantial progress was made, MATC cancelled the project that would use the cases. Armen sued MATC, but MATC raised the Statute of Frauds by saying that was no contract. Who is right?

14 13-2 Special Rules for Sales Contracts
-Usually contracts that are not written and are over $500 are not enforceable. However since this was an agreement specifically for manufactured goods and Armen began production of them and had an agreement of any kind he is right.

15 13-2 Special Rules for Sales Contracts
-Example B: Pugliano vs. Messing Cole entered into negotiations to buy a car. Cole gave Messing Motors a check for $ as a deposit. On the check Cole wrote “agreement to purchase and deposit subject to inspection and vehicle financing.” On the back of the check Cole wrote “agreement to purchase and deposit subject to vehicle inspection, application,of all manufacturer's and dealers warranties, and ability to obtain financing.” When Messing Motors attempted to raise the purchase price, Cole sued to enforce the contract. Who is right?

16 13-2 Special Rules for Sales Contracts
-The court ruled that the writing on the check was evidence of a contract and ruled in favor of Cole. The deposit was part performance of the contract and is such an exception to the writing requirement of the statute of frauds. Ordinarily part performance is only good for part of a car, however a car is indivisible.

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